Government Needs To Give More Certainty Over Public Finances
The government must end competitive bidding on short-term funding pots for councils and fix the crisis in local audit in a bid to improve the resilience of the country’s public finances, chartered accountancy body ICAEW has said.
In a series of recommendations made to the government in a submission and letter to the Chancellor ahead of the Autumn Statement, ICAEW has called for the competitive short-term funding process to be replaced with long-term funding streams to give councils more certainty over future spending. Councils waste time and money submitting bids for relatively small sums, and resources are then wasted in Whitehall assessing the bids. This inefficiency diverts both councils and central government from focusing on delivering for local communities.
ICAEW said government must also fix the crisis in local authority financial reporting and audit, which are critical to accountability, governance and effective financial management. Most councils in England are now at least two years behind on completing audits, with a cross-government effort to clear the backlog of 918 delayed audit opinions urgently needed.
Additionally, ICAEW has proposed a local public services strategy to urgently address the significant problems in local government that stop councils from delivering the quality of public services that communities need, pushing many local authorities to the brink of bankruptcy and resulting in public money being wasted. Without attention to how local government is funded, meaningful reductions in regional inequalities are not possible.
The asks come after a number of councils in England have declared effective bankruptcy, including most recently Birmingham City Council, and amid warnings that 1 in 10 county councils face bankruptcy. A Parliamentary committee will hear evidence on financial distress in local authorities on Wednesday.
Other recommendations to support businesses include a strategy to address poor HMRC service standards, providing incentives for investment in net zero-aligned R&D, interventions to address business banking concerns, and boosting investment to address skills shortages and unlock growth.
Michael Izza, Chief Executive, ICAEW said: “The structural failures in the local audit system, with nearly a thousand delayed audits, may have serious financial consequences for communities across England."
“We hope the Chancellor will use the Autumn Statement as an opportunity to increase the resilience and sustainability of the public finances, with a cross-government effort to clear the mountain of delayed audit opinions to get the system back on track and by introducing long-term funding streams for councils."
“A clear strategy is needed to increase the resilience of the UK economy, underpinned by certainty, clarity, stability and the right long-term incentives to influence investment, employment and growth.”